Back to the Basics: Understanding ERISA

Retirement is something every employee looks forward to, particularly if the employee knows money has been set aside for retirement. Not having money set aside can be stressful for those close to retirement age. However, discovering that the money set aside and promised for retirement is no longer available or is significantly less than expected could possibly be even worse. Recently, retired city employees in Detroit appeared before a bankruptcy judge to try and get some of the money promised to them for their many years of service to the city. Unfortunately for Detroit’s former employees, ERISA only governs private pension and benefit plans.

ERISA

ERISA, or the Employee Retirement Income Security Act, was created to protect employees from poorly funded and poorly managed private employer benefit plans. It requires employers to disclose financial details and any other important information about the benefit plans they provide to their employees. This information allows employees to see what their future funds and benefits might be and prevents employers from misusing the set aside funds. ERISA sets minimum standards for when the benefits begin to accrue, when an employee has rights to employer “matched” contributions, and when benefits will vest, or become unconditionally the employee’s.

ERISA provides for more than just retirement or pension plans. It also governs health insurance and disability plans. Health insurance plans generally do not vest like retirement plans. This means that the employer will likely not have to provide health insurance once the employee has been terminated or retired. However, ERISA has been amended over the years to include COBRA and HIPAA. COBRA allows for limited extension of health insurance benefits for the employee and the employee’s covered family members after the employer provided plan has been terminated. HIPAA provides both increased privacy rights and protection from pre-existing condition wait times when transferring out of an employer benefit plan.

Employers and ERISA

Employers are not required to provide pension or health benefit plans under ERISA, but if they do then the employer must follow ERISA guidelines. Since ERISA only sets minimum requirements for provided benefits, employers can offer greater benefits. Some employers will offer to “match” employee contributions to retirement plans. While an employee will have the right to all of his or her contributions, the employer can set requirements for when the employee has the right to the “matched” contributions. Additionally, new guidelines from the Department of Labor clarify that, under ERISA, spouses in legal same-sex marriages are covered under benefit plans regardless of state recognition.

If you have any questions about benefit regulations or feel you may be entitled to benefits contact an experienced employment law attorney.

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